- Meanwhile, all pending orders are equally divided between the buy and the sell ones
- Nearly three quarters (73%) of traders are long the US Dollar
- The weekly PP at 112.11 represents immediate resistance
- Support is the Bollinger band and the down-trend around 111.20
- 64% of the survey participants expect the US Dollar to cost less than 114 yen in three months
- Upcoming events: US Markit Manufacturing PMI, FOMC Member Bullard Speech, US Crude Oil Inventories, US New Home Sales
The Greenback's performance was opposite to the Sterling's, as it appreciated against most major currencies on Monday. The largest gains were registered against the Loonie (0.75%) and the Pound (0.74%), whereas other notable gains were seen against the remaining commodity currencies, namely 0.49% against the Kiwi and 0.41% versus the Aussie. The USD/JPY edged up 0.36%, followed by a 0.26% against the Euro. The USD/CHF remained relatively unchanged, surging 0.04%.
Sales of previously owned US homes declined more than expected in February after hitting the second highest level since 2007, a sign that demand for housing could be weakening due to increasing prices and low inventory. The National Association of Realtors reported that existing home sales plunged 7.1% in February from the preceding month to an annual rate of 5.08 million units, the lowest level since November. Economists, however, had expected a modest decline of 2.6% to a rate of 5.33 million in the reported month. A strong growth in residential real estate is being undermined by a limited availability of properties that has led to higher offering prices. The median price for a previously owned home soared 4.4% from a year ago to $210,800.
Housing was a strong side of the US economy throughout 2015, contributing more than a quarter of a percentage point to GDP growth over the year. Historically, low interest rates and a sturdy improvement in the job market could lend it support, but prices have increased in many markets amid lack of supply, and construction levels for new homes remain historically low. According to the Commerce Department, housing starts increased 5.2% last month, but home builders continue to report land and labour shortages, resulting in delays in projects' completion.
Vatsal Srivastava, director at the Blackwater Consulting, explains why the US Dollar is a advancing against the Yen this week. Even though he says that there was nothing fundamentally driving USD/JPY on Monday, one of the key drivers is the falling oil prices, which is actually boosting the Yen, in his opinion, as there is an addition cause for more QQE. Vatsal Srivastava also mentions that "it is going to be a hard economic ride ahead and there seems to be no light on the horizon for Japan as of now". "Lets hope for the best," he added.
US Markit Manufacturing PMI is the only relevant event
With the Japanese factory activity figures already released, the only upcoming economic data release to influence the USD/JPY pair is the US Manufacturing PMI. The Manufacturing Purchasing Managers Index (PMI) is released by the Markit Economics and captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the manufacturing PMI is an important indicator of business conditions and the overall economic condition in the United States.USD/JPY struggles to remain above 112.00
The USD/JPY currency pair extended its recovery yesterday, reaching the 112.00 major level. The Greenback now faces an immediate resistance at 112.11 in face of the weekly PP, but this level might give in, as the Buck appears to be heading towards its descending channel's resistance line around 113.40. However, technical studies are now giving bearish signals in all timeframes, suggesting that supply, represented by the weekly PP, is sufficient to cause a decline towards the nearest support, namely the Bollinger band at 111.38, which in turn is reinforced by the channel's lower border.Daily chart
The US Dollar keeps struggling to post significant gains against the Japanese Yen, ever since a sharp slump last Thursday. The pair remains in a bearish trend and another retest of the resistance line is not expected to occur today. The Feb low at 110.97 could still provide some support in case bears take over, whereas the 200-hour SMA is likely to prevent the pair from reaching the resistance trend-line.
Hourly chart
Bulls remain in control
Bulls also dominate the OANDA market, where 64% of open positions are long, unchanged since yesterday. The sentiment as reported by SAXO Bank is keeps improving - 58% of currently open positions are long, down from 61% recorded on Monday.
Spreads (avg, pip) / Trading volume / Volatility
More than a half expect the exchange rate to fall under 114 yen
The majority (64%) now assumes that the US Dollar is to cost less than 114.00 yen after three month time. The most popular choice implies that the Greenback is either to cost somewhere between 106.50 and 108.00 yen in three months, selected by 22% of the voters. According to the votes collected between Feb 22 and March 22, the mean forecast for June 22 is 112.32. At the same time, 12% of the surveyed believe the Greenback could fall either in the 108.00-109.50, or 112.50-114.00, or even in the 114.00-115.50 price interval after a three month period.